Financial review. David Warren Group Chief Financial Officer. The financial review covers the financial year ended 31 December 2017.

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1 Financial review The financial review covers the financial year 31 December. Commentary on performance uses variances on a continuing organic and basis, unless otherwise stated. Constant is calculated by rebasing at foreign exchange rates. Sub-segmentation of revenues are unaudited and are shown to assist the understanding of performance. Cost of sales mainly comprise data and licence fees, data feed costs, expenses incurred in respect of share of surplus arrangements that are directly attributable to the construction and delivery of customers goods or services, and any other costs linked and directly incurred to generate revenues and provide services to customers. David Warren Group Chief Financial Officer Highlights Total income of 1,955 million (: 1,657 million) increased by 18 and total revenue of 1,768 million (: 1,515 million) increased by 17 Adjusted EBITDA 1 of 915 million (: 771 million) increased by 19 Adjusted operating profit 1 of 812 million (: 686 million) increased by 18 Operating profit of 626 million (: 427 million) increased by 47 Adjusted basic earnings per share 1 of pence (: pence) increased by 19 Basic earnings per share of pence (: 63.8 pence) increased by 141 Including discontinued operations: Total income of 1,955 million (: 2,048 million) decreased by 5, and total revenue of 1,768 million (: 1,905 million) decreased by 7. Adjusted operating expenses 1 of 919 million (: 955 million) decreased by 4 Adjusted EBITDA 1 of 915 million (: 798 million) increased by 15 Adjusted operating profit 1 of 812 million (: 713 million) increased by 14 Operating profit of 603 million (: 530 million) increased by 14 Adjusted basic earnings per share 1 of pence (: pence) increased by 15 Cash generated from operations of 852 million (: 618 million) increased 38 Year end operating net debt to pro-forma adjusted EBITDA at 1.7 times (: 1.1 times), within the Group s normal target range of 1 2 times 1. London Stock Exchange Group uses non-gaap performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business. As in previous years, adjusted operating expenses, adjusted operating profit, adjusted profit before tax and adjusted earnings per share all exclude amortisation and impairment of purchased intangible assets and goodwill and non-underlying items 36 London Stock Exchange Group Annual Report December

2 Strategic Report Financial review Continuing Dec Dec Discontinued Total Continuing Discontinued Total (Continuing) organic and 2 Information Services Post Trade Services LCH Post Trade Services CC&G and Monte Titoli (2) Capital Markets Technology Services Russell Investment Management Other Total revenue 1,768 1,768 1, , Net Treasury Income through CCP businesses Other income Total income 1,955 1,955 1, , Cost of sales (215) (215) (175) (200) (375) Gross profit 1,740 1,740 1, , Operating expenses before depreciation, amortisation and impairment 1 (816) (816) (706) (164) (870) 15 6 Share of loss after tax of associates (9) (9) (5) (5) Adjusted earnings before interest, tax, depreciation, amortisation and impairment Depreciation, amortisation and impairment (103) (103) (85) (85) 22 7 Adjusted operating profit Operating profit/(loss) 626 (23) Adjusted basic earnings per share p 148.7p 124.7p 5.0p 129.7p 19 Basic earnings per share 153.6p (7.2p) 146.4p 63.8p (20.3p) 43.5p Before amortisation of purchased intangible assets and non-underlying items 2. Organic growth is calculated in respect of businesses owned for at least in either period and so excludes ISPS, Mergent, SwapMatch and The Yield Book Note: s in all tables are calculated from unrounded numbers. Commentary on the segments is done on a continuing basis unless stated otherwise. Total Income (Continuing Operations) m 2,000 1,750 1,500 1,250 1,000 1, FX 1,721 at 30 Net Treasury Income 158 Organic 1 46 Inorganic 2 1, Organic includes 9m of non-core income in 2. Inorganic includes income for businesses held for less than in either period: ISPS, Mergent, SwapMatch and The Yield Book Information Services Dec Dec organic and 1 FTSE Russell Indexes Real Time Data Other Information Services Total revenue Cost of sales (62) (54) 14 4 Gross profit Operating expenses 2 (291) (204) 43 Operating profit Organic growth is calculated in respect of businesses owned for at least in either period and so excludes ISPS, Mergent and The Yield Book 2. Operating expenses and operating profit variance percentage is shown on a reported basis only i.e. not on a basis. s will include underlying movements and foreign Information Services provides global indexes products, real time pricing data, product identification, reporting and reconciliation services. was 736 million (: 595 million). London Stock Exchange Group Annual Report December 37

3 Financial review continued FTSE Russell s revenue was 546 million (: 409 million), including first time contributions from Mergent and The Yield Book. FTSE Russell revenue increased by 15, with performance in line with the Group s announced double-digit growth target for FTSE Russell revenue. This performance was driven by increases in AUM levels in benchmarked ETFs and other investable products, as well as strong subscription renewal rates and data sales. Following the 2014 acquisition of Frank Russell Company, targets were set for both cost and revenue synergies, and in we achieved the 3 year target of US$78 million for cost synergies on time and met the 5 year target for revenue synergies of US$48 million, more than 2 years early. Real Time Data revenue increased by 1 year on year due to a focus on enterprise licensing, while the number of terminals decreased by 10 to 180,000 (: 200,000) with the reduction largely in lower yield terminals. Other Information Services revenues increased by 15, mainly as a result of growth in both UnaVista, driven by continued user base expansion for regulatory reporting, trade confirmations and reconciliations especially in anticipation of MiFID II implementation in 2018, and SEDOL from continued licence growth. Cost of sales rose by 4 mainly as a result of increased data charges and partnership costs, both related to growth in FTSE Russell revenues. Gross profit margin expanded as a result of revenue growth across the division. Operating expenses of 291 million (: 204 million) increased by 43, driven by the 32 million net impact of Mergent and The Yield Book acquisitions and ISPS disposal, and foreign exchange movements due to the weakening of Sterling relative to the US Dollar. Cost increases were partially offset by the synergy achievement from the Russell Index acquisition. Operating profit rose by 14 to 383 million (: 337 million), driven largely by FTSE Russell revenue growth and contribution from the acquisitions of Mergent and The Yield Book. Post Trade Services LCH Dec Dec OTC Non-OTC Other Total revenue Net Treasury Income Other income Total income Cost of sales (88) (56) Gross profit Operating expenses 1 (280) (268) 4 Operating profit Operating expenses and operating profit variance percentage is shown on a reported basis only i.e. not on a basis. s will include underlying movements and foreign Post Trade Services LCH comprises the Group s majority owned global clearing business. Total income was 562 million (: 447 million). OTC clearing revenue increased by 17, driven by SwapClear, predominantly in client clearing with trade volume increasing by 29 to 1,227,000 (: 952,000). LCH SwapAgent executed its first trades in, having launched in, to simplify the processing, margining and settlement of non-cleared derivatives. performance is in line with the Group s announced double-digit growth target for OTC clearing. Non-OTC clearing revenue increased by 7, reflecting strong growth in Fixed Income volumes cleared. Clearing in repo and cash bond markets increased to 87.5 trillion (: 70.8 trillion). In, RepoClear launched Sponsored Clearing, a service offering buy-side firms direct access to LCH, enabling firms to reduce their risk and maximise balance sheet efficiencies. Other revenue, which includes non-cash collateral management fees and compression services grew by 38. Net Treasury Income increased by 39 to 120 million with a 26 increase in average cash collateral held to 84.5 billion, due to increase in OTC and RepoClear volumes (: 67.0 billion). Cost of sales increased 47, mainly due to growth in SwapClear and the associated increase in share of surplus. Gross profit increased by 17 to 474 million. Operating expenses increased by 4 with foreign exchange movements due to the weakening in Sterling relative to the Euro and higher depreciation from investment to support growth, partially offset by the impact of cost saving initiatives. LCH EBITDA margin increased by 8pp to 44 (: 36), moving towards the announced target of c.50 by Operating profit increased by 58 to 194 million (: 123 million). Post Trade Services CC&G and Monte Titoli Dec Dec Clearing (CC&G) (8) (14) Settlement, Custody and Other (MT) Inter-segmental revenue 1 Total revenue (2) Net Treasury Income (CC&G) (3) (9) Total income (4) Cost of sales (17) (13) Gross profit (7) Operating expenses 1 (64) (81) (21) Operating profit Operating expenses and operating profit variance percentage is shown on a reported basis only i.e. not on a basis. s will include underlying movements and foreign Post Trade Services provides clearing (CC&G), settlement and custody activities (both Monte Titoli). Total income (excluding inter-segmental income) was 151 million (: 147 million). 38 London Stock Exchange Group Annual Report December

4 Strategic Report Financial review CC&G clearing revenues decreased by 14 influenced by a fall in derivatives clearing volumes mirroring trading performance on the Italian IDEM market. Monte Titoli revenues increased by 6, due to growth of custody revenues from domestic and international clients who transferred their portfolios to Monte Titoli accounts, and the benefit of a full year of a new domestic pricing structure introduced from May. CC&G generates Net Treasury Income by investing the cash margin held, retaining any surplus after members are paid a return on their cash collateral contributions. Net Treasury Income decreased by 9 mainly due to unfavourable spreads and lower cash held in. The average daily initial margin at 11.1 billion is down 9 (: 12.1 billion) due to lower volatility and volumes from Italian fixed income markets. Cost of sales rose by 28 largely as a result of the discount phase-out of the settlement acquisition cost from T2S in November. Operating expenses decreased by 21, driven by the absence of globesettle impairment costs of 8 million. Operating profit increased by 34 to 71 million (: 53 million). Capital Markets Dec Dec organic and 1 Primary Markets Secondary Markets Equities (1) (3) Secondary Markets Fixed Income, Derivatives and Other (2) Total revenue Cost of sales (16) (22) (28) (30) Gross profit Operating expenses 2 (195) (169) 15 Operating profit Organic growth is calculated in respect of businesses owned for at least in either period and so excludes SwapMatch 2. Operating expenses and operating profit variance percentage is shown on a reported basis only i.e. not on a basis. s will include underlying movements and foreign Capital Markets comprises Primary and Secondary Market activities. was 391 million (: 368 million). increased by 3, largely driven by Primary Markets performance, with revenue increasing by 19 as UK equity issuance rebounded strongly in the Main Market after prior year uncertainty following the UK referendum to leave the European Union. The total amount of capital raised across our markets, both through new and further issues, increased by 73 to 44.2 billion (: 25.6 billion). There was a 45 increase with 194 new issues across our markets (: 134). The pipeline of companies looking to join our markets continues to look promising. In Secondary Markets, in the UK average order book daily value traded rose by 4 at 5.3 billion (: 5.1 billion). Italian equity trading volumes decreased by 6 due to lower market volatility at 276,000 trades per day (: 295,000). Trading on Turquoise, our pan-european equities platform, decreased by 28 in average daily equity value traded, against a strong performance to 3.9 billion (: 5.4 billion), with some offset from growth in the higher margin Block Discovery trading. Fixed Income, Derivatives and Other revenue decreased by 2. The result reflects a 30 decrease in volumes on the Italian IDEM market, Fixed Income decreased with a decline of 6 in MTS Cash and BondVision notional value, and an 8 decline in MTS Repo. Cost of sales decreased by 30 reflecting lower Turquoise lit book revenues with gross profit up by 5. Operating expenses increased by 15 to 195 million (: 169 million) with the main driver being foreign exchange movements due to the weakening in Sterling relative to the Euro. Operating profit increased by 2 to 180 million (: 177 million). Technology Services Dec Dec Inter-segmental revenue Total revenue Cost of sales (29) (28) 6 4 Gross profit Operating expenses 1 (84) (64) 31 Operating (loss)/profit 1 (2) 12 (117) 1. Operating expenses and operating profit variance percentage is shown on a reported basis only i.e. not on a basis. s will include underlying movements and foreign Technology Services provides hosting solutions, client connectivity and software products for the Group and third parties. Third party revenue was 91 million (: 88 million). Operating expenses increased by 31 to 84 million (: 64 million), driven by continued Group technology investment, centralisation of costs and foreign exchange movements due to the weakening in Sterling relative to the Euro and US Dollar. The Technology segment made a loss of 2 million (: 12 million profit). The Group disposed of 2 Technology businesses: MillenniumIT ESP was sold on 28 December and Exactpro was sold on 17 January 2018 post year end. These businesses generated a total of 30 million revenue, 22 million of cost of sales and 8 million operating cost in. London Stock Exchange Group Annual Report December 39

5 Financial review continued Operating Expenses (Continuing Operations) On a continuing basis, Group operating expenses before amortisation of purchased intangible assets and non-underlying items were 919 million (: 791 million). Operating Expenses (Continuing Operations) m 1, FX 834 at 53 Net Underlying 32 Inorganic 1 1. Inorganic includes costs for businesses held for less than in either period: ISPS, Mergent, SwapMatch and The Yield Book 919 Operating expenses increased by 6. The Group cost base was adversely affected by 43 million of foreign exchange movements arising as a result of translating and revaluing its foreign costs, assets and liabilities into LSEG s reporting of Sterling. The main drivers of the cost base increase were variable staff costs and depreciation. Depreciation, amortisation and impairment increased by 34 to 103 million (: 77 million excluding 8 million globesettle impairment) during the year. A similar increase is expected in 2018, as the Group continues to invest in core technology, react to regulatory change and deliver new products. In, the Group achieved the previously announced run rate synergy targets for Frank Russell Company and LCH-related cost savings. Offsetting this was a 32 million net impact of inorganic items, being businesses owned for less than in either period, principally ISPS, Mergent and The Yield Book. The Group continues to exercise strong cost control and invest in new products to support growth will see the effect of a full year of The Yield Book costs and recent Technology disposals. Share of Loss after Tax of Associates The 9 million loss reflects an increase in the Group s share of the operating loss of CurveGlobal to (: 26) following further investment, and a 4 million recognition of historic losses due to increased ownership share. Despite client focus on MiFID II implementation during, CurveGlobal volumes continued to grow and open interest at the end of was 162,000 contracts (: 39,000 contracts). Non-Underlying Items and Purchased Intangible Assets Amortisation of purchased intangible assets decreased by 4 million to 153 million (: 157 million). Additional charges included 25 million of transaction-related costs, 7 million of restructuring costs and 8 million of integration costs. These were partially offset by a profit after tax of 7 million relating to the disposal of ISPS and MillenniumIT ESP businesses. Finance Income and Expense and Taxation Net finance costs were 62 million, down 1 million on the prior year on a continuing basis. The effective tax rate (ETR) for the year in respect of continuing underlying operations and including the effect of prior year adjustments, is 22.4 (: 22.5). This reflects reductions in both the UK and Italian tax rates, the mix of profits in the Group and finalisation of prior year tax returns. The underlying ETR for excluding one-off items was 23.4, and is expected to be similar in The contribution of continued underlying operations in the US towards the ETR was stable in the period. US tax reform was signed into law in December with effect from However, we do not expect the lower Federal tax rate to have a material impact on the Group s combined underlying effective tax rate. In part this is due to the manner in which the US acquisitions have been financed and the introduction of a new base erosion anti-abuse tax (the BEAT), which will apply to intercompany transactions with the wider Group. Cash Flow and Balance Sheet The Group s business continued to be strongly cash generative during the year, with cash generated from continuing activities of 852 million (: 618 million). At 31 December, the Group had net assets of 3,752 million (: 3,614 million). The central counterparty clearing business assets and liabilities within LCH and CC&G largely offset each other but are shown gross on the balance sheet as the amounts receivable and payable are with different counterparties. Net debt Year 31 December Gross borrowings 1,953 1,166 Cash and cash equivalents (1,381) (1,151) Net derivative financial liabilities Net debt Regulatory and operational cash 1, Operating net debt 1, At 31 December, the Group had operating net debt of 1,639 million after setting aside 1,042 million of cash and cash equivalents held to support regulatory and operational requirements, including regulated cash and cash equivalents at LCH Group, and amounts covering requirements at other LSEG companies. Regulatory and operational cash increased by 194 million during the period ember as a result of over 100 million surplus cash held in LCH, due to be distributed to LSEG in H1 2018, with the balance comprising cash retained at Monte Titoli (to support its CSDR obligations) and other regulatory and operational requirements. The Group s gross borrowings increased by 787 million during the period to 31 December, primarily due to the acquisitions of The Yield Book and Mergent as well as the completion of a 200 million share buy back programme. The Group retained total committed bank facilities of 1,200 million during the financial year. A new facility of 600 million was arranged on improved terms whilst an existing facility, also of 600 million, was ext for a further year to November The new facility is a 5 year commitment with 2 one-year extension options available to the Group, subject to lender approval. In September, the Group took advantage of favourable debt capital market conditions and ext its debt maturity profile by issuing 1 billion of bonds in million tranches under its updated 2 billion euro medium term notes programme. The bonds are unsecured and the tranches are due for repayment in September 2024 and September The coupons are fixed at per annum 40 London Stock Exchange Group Annual Report December

6 Strategic Report Financial review and 1.75 per annum respectively. However, 700 million of the proceeds of the bonds have been swapped into USD as part of the Group s objective to match earnings in and protect key ratios, resulting in an effective bl rate of interest of 2.8 per annum overall. The Group redeemed in full LCH Group s 200 million Preferred Securities at the first Issuer Call date in May ; it also put in place a 1 billion euro commercial paper programme later in which, at the end of the year, remained unutilised. With over 650 million of undrawn, committed bank lines available, together with strong cash generation, the Group continues to be well positioned to fund future growth, with scope for further refinancing in 2018/19 to underpin its longer term debt capital positioning. Debt maturity profile m 1,400 1,200 1, Undrawn Drawn The Group s interest cover, the coverage of net finance expense by EBITDA (consolidated earnings before net finance charges, taxation, impairment, depreciation and amortisation, foreign exchange gains or losses and nonunderlying items), increased to 15.5 times (: 13.0 times) in the to 31 December. This was driven primarily by earnings growth with interest costs remaining in line with. The Group s organic cash generation remained strong but significant inorganic expansion increased leverage (operating net debt to EBITDA updated to account for the EBITDA of acquisitions or disposals undertaken in the period) to 1.7 times at 31 December (31 December : 1.1 times). Leverage remains well within the targeted range of 1 2 times. The Group s long-term credit ratings were raised on the back of strong growth and prudent leverage management. Moody s and S&P increased their ratings of LSEG to A3 and A- respectively and changed their outlooks to stable. LCH Group withdrew its rating upon redemption of its Preferred Securities but initiated new long term ratings with S&P at LCH Ltd and LCH S.A. to support business lines, with both ratings set at A+ with a stable outlook. Foreign exchange Spot / rate at 31 December Spot /US$ rate at 31 December Average / rate for the year Average /US$ rate for the year The Group s principal foreign exchange exposure arises as a result of translating its foreign earnings, assets and liabilities into LSEG s reporting of Sterling. For the ember, for continuing operations, the main exposures for the Group were its European-based Euro reporting businesses and its US based operations, principally FTSE Russell, Mergent and The Yield Book. A 10 Euro cent movement in the average / rate for the year and a 10 cent movement in the average /US$ rate for the year would have changed the Group s continuing operating profit for the year before amortisation of purchased intangible assets and non-underlying items by approximately 23 million and 24 million, respectively. The Group continues to manage its translation risk exposure by matching the of its debt to the of its earnings, where possible, to ensure its key financial ratios are protected from material foreign exchange rate volatility. Earnings per share The Group recorded an adjusted basic earnings per share, which excludes amortisation of purchased intangible assets and non-underlying items, of pence (: pence). Basic earnings per share were pence (: 43.5 pence). Dividend The Board is proposing a final dividend of 37.2 pence per share, which together with the interim dividend of 14.4 pence per share paid to shareholders in September, results in a 19 increase in the total dividend to 51.6 pence per share. The final dividend will be paid on 30 May 2018 to shareholders on the register as at 4 May Financial Targets At the 12 June Investor Update event in, the Group set out financial targets as below and continues to progress against the targets, as referenced earlier in the text. Financial Targets to 2019 FTSE Russell LCH LSEG Double-digit growth to continue Sustainable and attractive margins over the same period Double-digit OTC revenue growth to continue Accelerating EBITDA margin growth approaching 50 by 2019 Operating expenses held at c.4 p.a. increase while the Group continues to deliver revenue growth and improved margins Next phase cost saves 50m p.a. by exit 2019 EBITDA margin of c.55 London Stock Exchange Group Annual Report December 41